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PSATS’ POLICY STATEMENT Local Taxation Summer 2019 1
At all levels, government’s role is to provide facilities,
programs, and services that individuals cannot other-wise provide
for themselves and that the private sector cannot or will not
provide. Like that of the state and
federal governments, local government’s funding to deliver these
services is primarily generated by taxes. However, unlike the
fed-eral and state governments, local government’s taxing capacity
is limited to the authority granted by the state government.
PSATS opposes the reduction or elimination of any local
government fees, revenues, or taxing authority unless these
revenues are replaced dollar for dollar. When the state takes away
a local revenue source without replacement or supersedes a local
taxing authority, local governments are forced to either increase
property taxes or reduce or cut services to their resi-dents. In
addition, the Association strongly believes that the use of funds
derived from any general-purpose tax should not be limited or
restricted by the General Assembly but should be left to the
township’s discretion.
For local officials to respond adequately to the needs and
demands of their citizens, they must have the authority and
flexibility to tailor their tax structure to best meet these needs.
Local governments must be able to choose the proper mix of taxes to
generate sufficient tax revenues to meet the needs of the community
and ensure that the tax burden is shared equi-tably among all
categories of taxpayers, including individuals, businesses, and
industry. This tax structure must include prop-erty, revenue, and
income taxes.
Local TaxationAny reform or restructuring of the local tax
system must
establish a broad-based, long-term solution. To that end, local
tax reform must be comprehensive and provide a full, optional menu
of taxes for townships, including but not limited to, an income
tax, business privilege tax, amusement tax, local ser-vices tax,
property tax, and sales taxes.
Property taxThe current system requires local governments to
rely on
the property tax, which has been shown time and time again to be
an unfair burden on those with limited incomes. Part of the problem
is that three local taxing jurisdictions — the municipality,
county, and school district — must rely on the same property tax
base for a major portion of their revenues.
Many townships rely heavily on the property tax as a reliable
source of revenue. Although the earned income tax can be a greater
source of revenue, it varies due to economic conditions. Also, many
bedroom communities, particularly in border counties, have few tax
options and could not continue to operate without the property tax.
As such, PSATS must oppose the complete elimination of the property
tax.
The Association supports fair and flexible options to reduce the
property tax burden on residential property. While municipalities
may implement the Homestead Amendment to maintain a balance between
the residential and business tax burden, without a new source of
revenue, such as the authority to levy a higher income tax, few
townships have the financial means to do so.
PSATS also supports legislation that would assess bill-boards as
taxable real estate.
PSATS supports legislation that promotes continued edu-cation
for elected tax collectors and opposes any legislation that would
eliminate the position of elected tax collector.
Earned and personal income tax The earned income tax is the
biggest source of tax revenue
for many townships. Because it is based on income, the earned
income (wage) tax is generally perceived to be more equitable, and
therefore, more politically acceptable. ‰
Because the current taxation system in Pennsylvania relies
heavily on the property tax and many townships depend on it, PSATS
opposes the com-plete elimination of the tax. Instead, it supports
fair and flexible options that would enable townships to reduce the
property tax burden on residential property in a way that works for
them.
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2 PSATS' POLICY STATEMENT Local Taxation Summer 2019
Although the statutory limit on this tax for townships is 1
percent, the tax must be shared with the school district, so in
reality, the cap is ½ of 1 percent. The sharing provision pre-vents
the earned income tax from becoming a more important and equitable
source of revenue for most townships.
The sharing provisions between school districts and
munic-ipalities for the earned income and other Act 511 taxes
should be eliminated by giving each taxing jurisdiction its own
exclu-sive tax base. Further, townships should be authorized to
levy a higher earned or optional personal income tax, thereby
giving them the flexibility to reduce their reliance on the
property and nuisance taxes if they so desire.
PSATS opposes any legislation that would designate the state as
the collector of the local earned income tax.
Sterling Act PSATS has long supported amendments to the
Sterling
Act to authorize municipalities that levy the earned income tax
to collect and retain earned income taxes from munici-pal residents
who work in Philadelphia, as well as to require Philadelphia to
provide offsetting credits for income taxes paid to an individual’s
home municipality.
In addition, PSATS supports the apportionment proce-dure for
calculating the Philadelphia Tax credit, whereby a tax collection
committee, appeals board, and tax collector honor credits for wage
taxes paid to Philadelphia to the extent that such credits are
accurately calculated using apportionment.
The Philadelphia Tax Credit should not be used to reduce earned
income tax owed to a municipality on income not earned within
Philadelphia.
Realty transfer taxThe sharing provision on the 1 percent
portion of the
realty transfer tax between the municipality and school district
should be eliminated to allow the municipality to levy a full 1
percent on the sale of real estate.
Hotel occupancy taxTownships should be authorized to levy a 1
percent hotel
occupancy tax. The majority of hotel occupants are
non-res-idents, and revenues from the hotel occupancy tax should be
used to benefit tourism and other travelers through the
pres-ervation of open space, improved infrastructure, and the
provi-sion of public safety.
Business privilege and mercantile taxMunicipalities’ option to
adopt and collect a mercantile or
business privilege tax should be restored. The authority to levy
this tax was repealed by Act 145 of 1988 (Local Tax Reform Act.)
This tax would provide greater balance between the local tax burden
borne by residents and the business community.
Amusement tax PSATS opposes any legislation that would reduce or
elim-
inate the amusement tax, and the authority to levy this user fee
on admissions to motion pictures and similarly exempted businesses
should be restored.
This user fee pays for infrastructure and services used
primarily by non-resi-dents. If this tax were eliminated without
replacement revenues, townships would be forced to increase
property taxes on their residents.
PSATS opposes any legislation that would reduce or eliminate the
amusement tax, which is a user fee that helps to pay for
infrastructure and services used primar-ily by non-residents.
The Philadelphia Tax Credit should not be used to reduce earned
income tax owed to a municipality on income not earned within
Philadelphia.
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PSATS’ POLICY STATEMENT Local Taxation Summer 2019 3
Special-purpose taxes Real estate taxes levied and used
exclusively for specific
township services are a fair way to assess the cost of these
services directly on those who benefit. Townships should be given
more flexibility to levy these taxes at a millage rate suffi-cient
to fund the actual cost of the service and should be given
authority to levy special-purpose taxes for police, libraries, and
emergency response services and increase the ambulance tax levy
from .5 to 1.5 mills.
The levying of special-purpose taxes directs the tax dollars to
the service the government is providing. If these services are
demanded by the people and the limitations of the gen-eral taxing
authority do not enable funding for these services, townships
should have the authority to adopt special tax levies targeted to
that particular service.
Tax-exempt propertiesFair and equitable taxation is based on the
premise that
everyone pays his fair share of taxes. Responding to political
pressures from special-interest groups, the legislature granted
exemptions to various entities from the payment of local taxes.
For instance, townships do not receive any real estate tax
revenue or payments in lieu of taxes for the municipal services
provided to schools, churches, hospitals, colleges, and
gov-ernment-owned buildings. Consequently, fewer taxpayers are
supporting more expensive services, and the burden on these
taxpayers continues to increase to the benefit of the tax-ex-empt
special interests.
The Association believes that federal and state govern-ments
should not be allowed to adopt legislation to exempt any entity
from the payment of local taxes without adequate reimbursement from
the state.
If the state exempts an entity from local taxes, it should
pro-vide in-lieu-of-tax payments to the municipality to compensate
for the loss of tax revenue or authorize the municipality to
col-lect a municipal services fee from tax-exempt property owners
to cover the costs of municipal services, as recommended by the SR
323 Report on Unfunded Mandates (2010).
Tax-exempt properties on the rolls should be recertified
periodically to ensure that their use warrants their tax-exempt
status. “Common grounds” in gated communities should not be exempt
from property taxes, as these are for private benefit.
PSATS opposes a constitutional amendment that would exclude any
property from paying its fair share of tax liability.
ReferendumTownship supervisors are elected by their residents
to
make revenue-raising and expenditure decisions on behalf of
their electors, just like members of the General Assembly. By
requiring taxing decisions to be made by referendum, the
leg-islature would tie the hands of local officials and make it
dif-ficult, if not impossible, to raise the revenues needed for
local governments to continue to provide the services demanded by
their citizens. PSATS opposes referendum requirements for local tax
increases.
One growing threat has been special tax concessions for
profit-making interests. For example, ski resorts, bowling alleys,
golf courses, and businesses have successfully sought exemptions or
reductions in local taxes through the legisla-tive process. The
Association opposes the granting of special exemptions from such
taxes by the legislature.
Assessment reformWithout changes to the assessment process, the
effect
of any local tax reform will be greatly diminished. The
Association supports a task force to examine and facilitate the
implementation of recommendations that would modernize the state’s
assessment system to ensure that assessed values are determined
fairly.
Some counties have not reassessed property for decades. In
others, the assessment ratios remain artificially low and the same
millage rate brings in decreasing tax revenue. When the disparity
in assessed values exceeds a reasonable balance or uniformity in
property assessments, it results in an unfair tax burden for some
property owners while others do not pay their fair share.
Further, the county assessment laws should be amended to require
the assessed value of all property in the county to better reflect
the changing market values over time. Townships in those counties
with unrealistically low assessment ratios should have the
authority to make periodic adjustments to their statutory limits on
real estate taxes. The result will be that the actual millage
limits and effective revenue bases are more equitable, regardless
of the county in which a township is located.
The Association believes that federal and state governments
should not be allowed to adopt legislation to exempt any entity
from the payment of local taxes without adequate reimbursement from
the state.
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4 PSATS' POLICY STATEMENT Local Taxation Summer 2019
PENNSYLVANIA STATE ASSOCIATION OF TOWNSHIP SUPERVISORSDavid M.
Sanko, Executive Director
4855 Woodland Drive Enola, PA 17025-1291Telephone: (717)
763-0930 Fax: (717) 763-9732
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